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Au revoir’ and ‘Adios’ – An employee does not have the right to insist on transferring his place of work

In a mobile world where many employment tasks can be performed remotely, it is not uncommon for employees to change work locations, moving to another part of the province, across Canada or to other parts of the world, while continuing to work for the same employer. However, in two 2012 decisions, Staley v. Squirrel Systems of Canada Ltd. and Ernst v. Destiny Software Productions Inc., the BC Supreme Court made it clear that an employee is not entitled to insist that the employer must agree to relocate an employee to a location of the employee’s choosing, absent a contractual term providing for such a right. Accordingly, if the employee moves without the employer’s permission, it would entitle the employer to terminate the employee for cause.

The Staley Decision

In 2009, Mr. Staley married a member of the RCMP who was originally from Quebec. She wanted to return to Quebec and received approval from the RCMP in the summer of 2010 for a transfer to Montreal. In the spring of 2010, Mr. Staley began discussing a possible move with his boss, who indicated that he should continue with his work. At the time of this discussion, Mr. Staley had been employed by Squirrel Systems of Canada Ltd. (“Squirrel”) in Burnaby for approximately 15 years and held a management position dealing with software support.

When Mr. Staley’s wife sold her house, Mr. Staley advised his boss that they were proceeding with the move. He then took vacation time to look for a house in Montreal. The Court noted that there appeared to be an element of misunderstanding with respect to what occurred next. While there was no clear refusal by Squirrel to permit the transfer, there was also no clear acceptance of the proposed transfer on a permanent basis. Rather, there was some indication that Squirrel wished to retain Mr. Staley’s services but that the nature of the relationship would likely have to change. By the end of September 2010, Mr. Staley was in Montreal and performing his job duties for Squirrel remotely. At this point, the company decided to change Mr. Staley’s employment status from that of an employee to an independent contractor and verified this by way of an email to Mr. Staley.

Negotiations regarding the terms of Mr. Staley’s continuing status with Squirrel continued for a number of months until an impasse was reached in the spring of 2011. At the end of March 2011, Squirrel wrote to Mr. Staley directing him to return to work in Burnaby by a specified date in June 2011. When Mr. Staley did not return to work in Burnaby as directed, Squirrel terminated his employment without notice or pay in lieu. His benefits were also terminated shortly thereafter.

Mr. Staley sued Squirrel, alleging that he had been wrongfully terminated and that the company had reneged on an assurance to continue to employ him once he had moved to Montreal. Squirrel denied that: (a) it had advised Mr. Staley that he would be allowed to relocate to Montreal; and (b) that he would remain an employee of the company. It said that it attempted to negotiate an alternative arrangement with Mr. Staley to enable him to continue to work, but not as an employee.

Because Mr. Staley did not have a written contract with Squirrel, the Court found that he was employed by Squirrel pursuant to an oral contract of indefinite duration, which included the following relevant terms:

Mr. Staley would work at Squirrel’s offices in BC unless otherwise agreed; and

Mr. Staley would comply with reasonable directions of the employer.

The Court derived the first relevant term from the following facts:

the company’s operations were centralized at the Burnaby offices;

virtually all of the company’s employees were based in BC;

the company had no operations within the scope of Mr. Staley’s expertise and employment, outside of BC;

there was no evidence that any of the managers based outside of BC had the responsibility of managing employees located in the Burnaby offices; and

the employment status of other employees who had transferred from the Burnaby office to other locations had been changed from that of employee to independent contractor.

In considering the second relevant term of the employment contract, the Court found that the employer felt it had clear and valid reasons for maintaining a policy that required employees to be located in the Lower Mainland office:

The evidence indicates that there was an expectation that certain of the departments, including that of [Mr. Staley], were expected to have ready access to one another and that meetings and brainstormings were part of their culture. The evidence that [the company’s president] considered it problematic to have a corporate presence in another provincial jurisdiction and to have an employee located there due to the extra bureaucracy is not at all difficult to accept as reasonable. Finally, there is the simple and straightforward proposition that an employer has a right, within reason, of course, to determine how its business will be conducted. In this regard, I note the comments … in Stein v. British Columbia (Housing Management Commission) …:

I begin with the proposition that an employer has a right to determine how his business shall be conducted. He may lay down any procedures he thinks advisable so long as they are neither contrary to law nor dishonest nor dangerous to the health of the employees and are within the ambit of the job for which any particular employee was hired. It is not for the employee nor for the court to consider the wisdom of the procedures. The employer is the boss and it is an essential implied term of every employment contract that, subject to the limitations I have expressed, the employee must obey the orders given to him.

Ultimately, the Court concluded that Mr. Staley’s refusal to return to work at the Burnaby office when directed to do so by Squirrel constituted wilful disobedience or insubordination and that such conduct provided grounds for termination without notice as it was inconsistent with the continuation of the employer/employee relationship. The Court held that the fact that Squirrel had considered, but ultimately decided against, amending the terms of Mr. Staley’s relationship to permit him to work in Montreal could not be held against it.

The Court further rejected Mr. Staley’s argument that, even if Squirrel had grounds to terminate him, it was prevented from doing so based on the principle of “condonation”, which “provides that where an employer is aware of an employee’s misconduct yet permits the employment relationship to continue, the employer cannot later rely on the misconduct.” In this case, Squirrel had never clearly communicated to Mr. Staley that it was prepared to agree to a permanent relocation. Additionally, shortly after the move, it had advised Mr. Staley that the situation could not continue on a permanent basis. The parties then tried to negotiate an acceptable solution and the direction to return to the Lower Mainland was issued to Mr. Staley only after it became apparent that an agreement could not be reached.

The Ernst Decision

This decision involved an executive-level employee who moved from the Calgary area to Cabo San Lucas, Mexico, over the objections of Destiny Software Productions Inc. (“Destiny”), his employer.

Unlike Mr. Staley, Mr. Ernst had a written employment contract with his employer. The contract anticipated that Mr. Ernst would initially work out of his own home in the Calgary area. However, the company’s operations were based in Vancouver and the contract stated that the company would provide Mr. Ernst with a moving allowance in the event that Mr. Ernst and his family were required to move to Vancouver. The contract also provided that his salary would be increased on an annual basis by no less than the cost of living in Mr. Ernest’s province of residence.

At trial, Mr. Ernst argued that his employment contract did not place any constraints on where he worked for Destiny and that he was entitled to work from “home”, wherever in the world that might be. The Court accepted Destiny’s argument that the word “home” in the employment contract had to be interpreted on the basis of Mr. Ernst’s home at the time that the employment contract was entered into. The Court found that the parties contemplated that Mr. Ernst would either work in Alberta (his province of residence at the time the contract was made) or BC (where the company’s head office was located), but that the parties did not intend that Mr. Ernest would be working from a location outside of Canada. Although Mr. Ernst was permitted to work out of his home in the Calgary area, Destiny retained the power to determine the location of work. As a result, Mr. Ernst’s unilateral move to Mexico constituted grounds for termination of employment for cause.

As was the case in Staley, the parties negotiated for a period of time following the employee’s relocation without success before the company issued the notice of termination. The Court held that the fact that the parties entered into discussions and negotiations regarding a continuing relationship did not constitute condonation and that the company was entitled to a reasonable period of time to assess the effect of the employee’s unilateral decision to relocate. Accordingly, the three-and-a-half month discussion and negotiation period was not considered to be unreasonable given the circumstances.

Conclusions

The Staley and Ernst decisions provide useful insights for employers who are faced with similar situations:

When negotiating an employment contract, consider whether to identify the place of work in the contract. This is particularly important if the company has offices in multiple locations, the employee is relocating because of the position, or the position allows for many of the tasks to be done remotely.

When an employee advises that he or she is planning to relocate but wishes to continue working for the company, clearly discuss with the employee what options are or are not available. Be careful about creating unrealistic expectations about the ability to continue the existing relationship in another location. If oral discussions take place, consider following up in writing to ensure that the employee’s understanding of what was discussed is accurate.

If the employee moves before the terms of the relationship are resolved, the employer has a reasonable period of time to assess the impact of the move and whether revised terms can be negotiated. However, the employer should communicate that it is agreeing to continue the relationship on a temporary basis only and that it reserves the right to terminate the relationship if an agreement cannot be reached.

If it becomes apparent that mutually agreeable terms cannot be reached, the employer should take steps to terminate the relationship. Depending on the history of the relocation and negotiations, an employer will likely want to issue a direction to the employee to return to his or her original work location and state that failure to do so will result in the employment relationship being terminated.